But things could be different in countries where growth is high, such as India. This is what the HSBC India manufacturing PMI for March had to say: “Average cost burdens increased sharply across India’s manufacturing economy. Moreover, the rate of input price inflation accelerated to a series record pace. Panel members linked elevated purchasing costs to increased raw material prices, alongside higher taxes. Companies attempted to cover part of their greater cost burdens by raising their tariffs at a marked pace." That’s not all—the report talks of capacity pressures at suppliers, with a deterioration in vendor performance and supply lead times. Those surveyed reported shortages of raw materials and power cuts.

That the pace of the recovery is accelerating (along with higher raw material prices) is also seen in the 55.6% y-o-y rise in non-oil imports in February. The net result is likely to be: a) a recovery in capital expenditure, as the limits to capacity are being reached; b) the first signs of overheating—as in shortages of raw materials and higher wages and c) the return of pricing power, as seen in the recent hike in steel prices.